In the course of investigating the perceived crisis in business transition planning, U.S. Trust Company collaborated with the Eugene Land Entrepreneurial Center of Columbia Business School to produce a white paper entitled: The Owner’s Journey: Experiences Shared and Lessons Learned.*

The white paper reads as a thorough, in-depth, many-faceted alarm bell. The clarity with which it makes the case for early transition planning—in its multitude aspects—cannot comfortably be ignored—and certainly not by family businesses that wish to survive and transition their mission, vision, knowledge and wealth to future generations.

The authors found that few entrepreneurs started companies with the sole goal of getting rich. Rather they launched companies to fix a problem, to create something new, to act upon an insight that they alone saw, or simply to make the world a better place.

Getting rich or creating a legacy family business may not be the primary motivation of an entrepreneur, but as time goes by:

…capturing wealth and ensuring the sustainability of one’s life’s work becomes, very important.

To attain these goals, broad and careful planning is indispensable. For any business this is a lengthy and challenging process. For family businesses the difficulties involved are even more complex.

Families who have significant business assets need to acknowledge that there are two dynamics: one for the family and one for the business, and these dynamics need to be addressed in coordinated estate, exit and succession planning.

Several exit scenarios are described in the white paper. But for family-business owners, the most desirable among them is to pass the business on to a new generation of family members. However, the authors warn, an owner cannot always count on his/her children to be part of an exit plan. In keeping with the paper’s theme of long-term planning, a list of recommendations are supplied for preparing a family’s next generation to effectively take their places within the business, with a view toward multi-generational success:

Communicate your goals regarding the company with family members regularly.

Expose children to the business at an early age.

Encourage children interested in the business to educate themselves in appropriate skills with formal education and job experience outside the firm. Determine the appropriate person in the family with the right temperament, skills and experience for leadership.

Working with a professional psychologist can help with decisions about family succession.

Having a board with a majority of nonfamily members can be helpful in professionalizing the plan.

Regular family meetings, which can include a third-party expert in family business dynamics, can be helpful.

These recommendations are recognized family-business best-management practices that every family business would benefit from. The emphasis however is on persistence and flexibility through inevitable changes, while preparing for and accepting an unpredictable future.

——————————————————-

*All text in italics are direct quotes from The Owner’s Journey: Experiences Shared and Lessons Learned. Prepared by Eugene Lane Entrepreneurship Center at Columbia Business School in collaboration with U.S. Trust, Bank of America Private Wealth Management

Throughout parts of the globe where the seasons change people have been observing the winter solstice for millennia—imploring the sunlight to return and celebrating its readiness to do so.

I find myself writing this blog on the evening of December 21st—the winter solstice—the longest night of the year. Images of families come to mind—the elders and the young ones.

On winter solstices past, members of the Iroquois Nations went to sleep early to invite “the dreaming” where visions would instruct their lives for the following year.Iroquois Nations

The darkness of this night, open to interpretation, inspired many different traditions and rituals. Ancient Mongolians entered a mystical tent that represented the world, where their shaman undertook a spiritual journey to the North Star to clean their souls of sins. In ancient Rome the people honored the God Saturn with the weeklong feast of Saturnalia. With the return of the light many cultures celebrated the rebirth of a God, and from these traditions the holiday of Christmas was derived.

Modern astronomy has revealed that the sun does not disappear…that the cycle of the seasons is due to the earth’s axial tilt. But the psychology and emotional impact associated with the winter solstice has not changed. We shrink from the darkness, the winter cold, and gather our families and communities to call back the light and warmth.

As citizens of the earth, cycles and our responses to them are built into our DNA. Everything about our lives is cyclical, and that applies to family businesses no less than individuals. To them as well comes an inevitable time of change; a time that calls for the transition of leadership to the next generation, and the next. Here too, such a transition is open to interpretation. How will the family see this change? As an end, and frightening? As a beginning, and hopeful?

A family business, guided by the light and warmth of its incumbent leadership may struggle with their vision as that light wanes. And just as the sun when it dips below the horizon is not really gone, the wisdom and perspective of the founding generations continues to influence future ones.

Last week I attended the annual conference of Attorneys for Family Held Enterprises (AFHE). While there, I had the opportunity to hear speakers from a range of professional disciplines: family business advisors, financial planners, psychologists and attorneys.

I was particularly impressed by the clarity of the presentation entitled ‘Engaged Ownership. More Effective Governance for Multi-Generational Family Businesses’ given by Amelia Renkert-Thomas, former CEO of Ironrock Inc., her family’s 5th generation manufacturing business and founding partner of Renkert Thomas Consulting LLC.

In her presentation Ms. Renkert outlines commonly held assumptions about family business and counters them with realities. Here are selected bullet points taken from her slides:

Assumptions

Making money is the primary objective

Succession is about who will run the company

Shareholders are primarily interested in dividends

Continuity is the preferred outcome

Reality

There is more at stake than money

Succession is about preparing for multiple roles

Shareholders are primarily interested in shared purpose and vision

Continuity of core capital, not necessarily the business

All of these points are ‘tip-of-the-iceberg’ statements, the results of study, thought and experience. They invite investigation, discussion and action. What are your thoughts?